The Gessing Tire Company manufactures racing tires for bicycles. Gessing sells tires for $85 each. Gessing is planning for the next year by developing a master budget by quarters. Gessing's balance sheet for December 31, 2024, follows: (Click the icon to view the balance sheet.) Other data for Gessing Tire Company: (Click the icon to view the other data.) Read the requirements. Requirement 1. Prepare Gessing's operating budget and cash budget for 2025 by quarter. Required schedules and budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, cost of goods sold budget, selling and administrative expense budget, schedule of cash receipts, schedule of cash payments, and cash budget. Manufacturing overhead costs are allocated based on direct labor hours. Round all calculations to the nearest dollar. Begin by preparing the sales budget. Gessing Tire Company Sales Budget For the Year Ended December 31, 2025 First Quarter Second Quarter Third Fourth Quarter Quarter Total Budgeted tires to be sold 1,000 1,200 1,400 1,600 5,200 $ 85 85 $ 85 85 $ 85 Sales price per unit 85,000 || $ 102,000 $ 119,000 || $ 136,000 || $ 442,000 Total sales Prepare the production budget. Current Assets: Gessing Tire Company Balance Sheet December 31, 2024 Assets Cash 47,000 Accounts Receivable 50,000 Raw Materials Inventory 9,000 16,800 Finished Goods Inventory 122,800 Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation Total Assets Liabilities 142,000 (55,000) 87,000 209,800 (Unless otherwise noted, assume all of the following events occurred during 2024 and that any balances given are stated as of December 31, 2024.) a. Budgeted sales are 1,000 tires for the first quarter and expected to increase by 200 tires per quarter. Cash sales are expected to be 10% of total sales, with the remaining 90% of sales on account. b. Finished Goods Inventory on December 31, 2024 consists of 600 tires at $28 each. C. Desired ending Finished Goods Inventory is 30% of the next quarter's sales; first quarter sales for 2026 are expected be 1,800 tires. FIFO inventory costing method is used. d. Raw Materials Inventory on December 31, 2024, consists of 1,200 pounds of rubber compound used to manufacture the tires. e. Direct materials requirements are two pounds of a rubber compound per tire. The cost of the compound is $7.50 per pound. f. Desired ending Raw Materials Inventory is 30% of the next quarter's direct materials needed for production; desired ending inventory for December 31, 2025 is 1,200 pounds; indirect materials are insignificant and not considered for budgeting purposes. g. Each tire requires 0.50 hours of direct labor; direct labor costs average $16 per hour. h. Variable manufacturing overhead is $2 per tire. i. j. Fixed manufacturing overhead includes $5,000 per quarter in depreciation and $16,845 per quarter for other costs, such as utilities, insurance, and property taxes. Fixed selling and administrative expenses include $10,000 per quarter for salaries; $4,800 per quarter for rent; $1,350 per quarter for insurance; and $2,000 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 2% of sales. Prepare the production budget. Review the sales budget you prepared above. Gessing Tire Company Production Budget For the Year Ended December 31, 2025 Budgeted tires to be sold Plus: Desired tires in ending inventory Total tires needed Less: Tires in beginning inventory Budgeted tires to be produced First Second Third Fourth Quarter Quarter Quarter Quarter Total 1,000 1,200 1,400 1,600 5,200